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23 Nov 2021

Sending money overseas? Keep it simple and easy with these tips

By Damon Frith, wealth editor for Citi Sending money offshore can be expensive if you don't look at your options

There are many reasons why you may want to send money offshore, perhaps to a family member or in preparation for an investment.

The cost of such transactions used to be high and difficult to understand, but new technologies and transfer systems have reduced costs and transaction times, and made the whole process a lot more transparent.

However, it's wise to keep your guard up. Which organisation you choose to make your transfer, and how that money is received at the other end will make a difference to the cost for both the person transferring funds and the party receiving.

Just because Australia has a modern banking system does not mean one service is the same as the next. In June 2021 a report on remittances by the World Bank found the average cost globally for sending money offshore was 6.5 per cent of the amount sent. At 6.56 per cent, Australia was close to the world average, but still the fourth highest of G20 countries. Russia was the cheapest at 2.4 per cent.

In addition, the Australian Competition and Consumer Commission (ACCC) in 2019 released it's findings from research into money transfers, and found in some circumstances consumers could save up to $AU500 on a $US7000 transfer.

Where are the 'hidden' costs?

  • The most significant variation in price between suppliers is likely to come from the retail exchange rate on offer, known as the margin fee. You make look up the exchange rate for the Australian dollar to the US dollar and find $AU1.00 is worth US75c, but for an international funds transfer the organisation you have picked may only be offering US74c. The difference on each dollar transferred is the profit the organisation is adding into the transaction, and that margin fee can vary considerably between service providers.
  • An offer may be advertised as fee-free, which although true may not mean it's the best offer available. The old adage "it pays to shop around" works well for currency transfers.
  • Fees can come in various forms. In addition to the 'margin fee' there could be additional costs, including: conversion fees, fees charged by the institution receiving the funds and fees associated with the size and frequency of the transaction.
  • If time is an important factor, check with the provider how long it will take for the funds to be received by the recipient. Variations can be as little as minutes to as long as five days.
  • Make sure you take into account all the pros and cons of the service providers you consider to ensure both you and the recipients of the funds are getting the best deal to meet your requirements.


Take advantage of evolving technology

A more recent evolving technology and service is global currency accounts. Offered by banks these accounts typically allow people to hold funds in their local currency and transfer it easily into any of a basket of currencies offered.

If you are regularly paying funds in say US dollars, it would allow you to take advantage of exchange rate fluctuations to build your US currency holdings when the dollar moves in your favour.

Alternatively, if you receive funds from family or perhaps an investment like an offshore rental property or share dividends, you may continue to hold those funds in a foreign currency until a favourable currency change allows you to convert at a better rate.

Whichever path you choose for your foreign transactions, make sure your provider has the information available on its website to answer all your questions, or an easy method to ask and have your queries answered.


Discover how we have your currency needs covered

This information is not advice and has been prepared without taking account of the objectives, situations or needs of any particular individuals. Any individual should consider if the information is appropriate for your own situation. Individuals are advised to obtain independent legal, financial, foreign exchange and taxation advice prior to making financial decision. Past performance is not indicative of future performance. 

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